The Daily Update: ECB / US Jobless Claims

As expected, the ECB held monetary policy steady yesterday, however, not all the members are singing from the same hymn sheet it seems. Interest rates were left unchanged, with the rate on the main deposit facility remaining at -0.5%, the benchmark refinancing rate at 0% and the marginal lending facility at 0.25%.

In its statement the ECB says ‘In support of its symmetric 2% inflation target and in line with its monetary policy strategy, the governing council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. This may also imply a transitory period in which inflation is moderately above target’.

According to various news outlets two ECB policy makers did object to the new interest rate guidance. Belgian Governor Pierre Wunsch and Bundesbank President Jens Weidmann were concerned about wording that can be seen as making too much of a long-term commitment to loose monetary policy. It has been reported that ‘It was an unusually robust debate, and a lot more than just two people voiced concerns, but most were eventually won over by Lagarde’. Lagarde acknowledged at a news briefing that there was no unanimous backing for Thursday’s decision, though an ‘overwhelming majority’ was behind it.

We also had the initial jobless claims in the States yesterday. In another reminder that the labour market is not out of the woods, new claims for unemployment benefits rose to a two-month high last week. Unemployment benefits jumped from 368,000 to 419,000 in the week ended July 17 the highest level since mid-May. The consensus had been for 350,000 jobless claims.

Have a good weekend.